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Thursday, September 8, 2011

FROM HONDA TO MARUTI SUZUKI: A WIDE ANGLE VIEW OF CORPORATE STRATEGIES

(New Series No. 277, July 2011)

WHAT THE MARUTI BALANCE SHEET SHOWS

The 300-acre Maruti Suzuki factory in Gurgaon houses three plants and produces 7 lakh cars a year. The engine plant alone has a manufacturing capacity of 7.5 lakh engines a year.

The 600-acre Maruti-Suzuki plant in Manesar started production in February 2007. This factory houses Maruti's newest assembly plant with a capacity of 3 lakh cars a year.

Another assembly plant in this factory will begin production in March 2012 and will have a capacity of 2.5 lakh cars a year. The Suzuki Powertrain Diesel Engine factory adjoins Maruti's Manesar factory. This is a joint venture of Suzuki Motors (70%) and Maruti-Suzuki (30%) and has a capacity of 3 lakh engines a year.

12.7 lakh Maruti-Suzuki cars were produced in 2010-11 - 2.7 lakh units more than the installed capacity of its plants - and representing almost half of all cars produced in India.

Around 1.4 lakh Maruti-Suzuki cars were exported to 120 countries in 2010-11.Maruti earned slightly more than Rs.40,419 crores from sale of its cars during 2010-11.

Maruti-Suzuki contributed a total of Rs.4290.81 crores to the national exchequer by way of excise duties, and paid Rs.820.11 crores in taxes to the Haryana Government in 2010-11.
The company declared a total share capital of Rs.144.46 crores. The value of a Rs.5/- share went up to Rs.79.22 during 2010-11.

After deducting payments to employees (Rs.703.62 crores), bank interest payments (Rs.24.41 crores), costs of raw materials and plant maintenance (Rs.27,576.13 crores) and other expenses, the company declared a net profit of Rs.2288.64 crores.
WHAT THE BALANCE SHEET DOESN'T SHOW

Maruti-Suzuki had 8,500 employees as of March 31, 2011. Only 3,200 of the total of 8,500 employees are factory workers – 2,300 at the Gurgaon factory and 950 at the Manesar factory.
Apart from these 3,200 regular workers, every other worker in the Maruti factories is a contract worker, hired through a labour contractor.

Maruti first started hiring contract workers in 1977. In 2001, after a strike at the Gurgaon factory which was probably engineered by the management and was ruthlessly crushed, 1250 regular workers were laid off. Another 1250 workers were laid off in 2003. As of 2007, the Gurgaon factory had 1,800 regular workers and 4000 contract workers. The number of contract workers at the present date is not known.

According to figures from the ILO, regular workers comprise only 15% of the Maruti-Suzuki factory workforce – 85% are contract workers. This is a much lower proportion of regular workers than in companies such as Nokia (50% regular workers) and Ford (25% regular workers).

Regular workers in the Maruti-Suzuki factory are paid an average monthly basic salary of Rs.5,300/- and an “attendance allowance” of Rs.8,900/-. An amount of Rs.2,500/- is deducted from the salary for every day of non-attendance other than earned leave.

Contract workers hired through a labour contractor are paid an average monthly wage of Rs.7,200/- (for those with an ITI diploma) and Rs.6,200/- (for those who do not have an ITI diploma). There is no provision for leave, and an amount of Rs.2,000/- per day is deducted for absence from work. THE ARITHMETIC OF PROFIT

Assuming that none of the workers took leave, the total amount paid out by Maruti-Suzuki to their regular factory employees during 2010-11 is Rs.54.52 crores. Assuming that the number of contract workers today is 8,000 (twice that in 2007) and calculating at the higher rate (Rs.7,200/- per month) the total amount paid to the contract workers in 2010-11 is Rs.69.12 crores. The total amount paid to factory workers (Rs.123.64 crores) represents 5.4% of the profits of Rs.2,288.64 crore made by Maruti-Suzuki in the same period. THE MARUTI FORMULA- "LEAN MANUFACTURING"

One year ago, it took a herculean effort for the Manesar plant, working two shifts on the main (automated) production line, to make 1,100 cars a day. Today, the plant rolls out 1,200 cars every day from the main line and another 150 from the manual line. How has the pace of production has been stepped up?

Maruti Production System or MPS draws learnings from its parent company Suzuki Motor Corporation's concepts on `lean manufacturing' under Suzuki Production System (SPS).

Setting trends in new products and achieving customer delight starts with Manufacturing Excellence and Maruti's manufacturing excellence hinges around four important pillars-Cost, Quality, Safety and Productivity.

Every employee working on the line is 'cost sensitive' and functions in capacity of a Cost Manager. He is a key contributor in suggesting how to keep costs of production under control.

A product of poor quality requires repeated inspections, entails wastage in terms of repairs and replacements. "Do it right first time," is the principle followed to avoid wastage. To ensure quality, robots were devices and deployed, especially where they reduced worker fatigue and were critical in delivering consistent quality. With consistent improvements in the plant the company was able to manufacture over 600,000 vehicles in 2006-07 with an installed capacity of just 350,000 vehicles per year.

"Home or work place; Safety takes First Place". This has been the motto of the company where safety is concerned. Maruti attaches great significance to safety of its people and strongly advocates that safety at work place adds to quality of the products and improves productivity of the plant significantly.

In the Japanese manufacturing system, the central role is accorded, not so much to Quality, Productivity or Cost, but to Safety. When process flow, lay-out and systems are designed for maximum safety, they automatically contribute to better quality and productivity.
- from http://www.marutisuzuki.com/lean-manufacturing.aspx

The deepening economic crisis is justification enough for companies like Maruti to push even harder to cut costs and increase production. Shorn of jargon, Maruti's much-lauded lean manufacturing system is the tried-and-tested traditional system of squeezing the workers through increasing workloads, cutting wages and benefits, undercutting investments in safety and increased casualisation of the workforce.
Here's what lean manufacturing looks like on the factory floor.

The paintshop at the Manesar plant is a schizophrenic combination of cutting-edge robotic technology and brute physical labour. One one side are 12 painting robots. On the other, are workers carrying 25 kilo headloads of used screens up two flights of stairs and returning with a 30 kilo load of clean screens. Each worker has to carry 70-80 screens up and down the stairs, working an extra hour without pay if the job is not done by the end of the shift. The lunch-break (30 minutes) and tea break (15 minutes) are not counted as part of the working time on the shift.

The Quality Maintenance Unit employs 95 workers hired through a labour contractor. Their job includes cleaning out the tanks that hold thinners and solvents. They are always on the C-shift – from 12.30 in the night to 8.30 the next morning. Workers on the C-shift work non-stop. There are no breaks for food or tea. The food allowance of Rs.44/- that they used to be given has now been slashed to half. By the end of the shift, they are exhausted, giddy and nauseous from the chemical fumes they inhale. Workers in the Quality Maintenance Unit put in 32 to 192 hours of overtime every month, for which they are paid only Rs.28/- per hour, well short of the legal minimum of 1.5 times the normal wage. For many of these workers, the shift can extend to 17.5 hours of non-stop work without breaks or food.

"The tea break is seven minutes long. In that time, we have to run to the canteen, line up for tea and a snack, use the toilet and get back to the assembly line – and they expect us to be back with a minute to spare.”

“The line moves so fast that there's no time even to scratch an itch...”

“The company gave us all mobiles as gifts to celebrate reaching the one crore production mark, but what's the use - we don't have the time to call anyone.”

WORKERS AT THE MANESAR PLANT, SPEAKING TO FMS

Casual workers hired through a labour contractor are paid an average monthly wage of Rs.7,200/- (for those with an ITI diploma) and Rs.6,200/- (for those who do not have an ITI diploma). Casual workers on the A and B shifts are entitled to free meals at the canteen. There is no provision for leave. Wages for the day, and an extra penalty of Rs.2,000/- are deducted for every absence from work. Any protests or arguments with the contractor are dealt with by immediate dismissal.

Regular workers are not much better off. Their package consists of a basic pay of Rs.5,300/-, an incentive/attendance allowance of Rs.8,900/-, a house rent allowance of Rs.1,600/-, a Dearness Allowance and an allowance for children's education, adding up to between Rs.17,000 and 18,000/- a month. Although their contracts include provisions for paid leave and casual leaves, each day off work results in a deduction of Rs.2,200/- from the incentive allowance. The entire amount of Rs.8,900/- is forfeited if a worker takes more than four days off in a month.

Regular workers cannot be threatened by dismissal, but are harassed and humiliated by supervisors who abuse and manhandle them, arbitrarily move them from one assembly line to another, and report them to managers or the HR Unit for concocted offences. THE STRIKE

The workers at the Manesar factory started a new union in April 2011. The membership included both regular workers and casual workers hired through labour contractors. The management refused to recognize this union. On June 4, 2011, the workers stopped work. The A shift was just ending and the workers on the B shift had all come in. Workers on the C-shift were quickly contacted over the phone and asked to join the strike. Before the management realised what was happening, more than 2,000 men - regular workers, apprentices, trainees and contract workers from all three shifts – had occupied the factory, sending the management into a complete panic.

As the strike went into its second week, the Haryana Government declared it illegal, but was unwilling to intervene as they had done in the Honda strike. Although police were stationed in the factory premises, the management was reluctant to force the workers out of the factory, given the the risk of damage to the equipment. Equally, the workers were determined to hold their ground inside the factory – everyone was aware that being forced or persuaded to vacate the premises would be the beginning of the end, as it had been for striking workers in Rico Auto, Denso, Viva Global, Harsurya Healthcare, Senden Vikas .... crushed protests that left workers far more vulnerable than before.

By the time the strike entered its tenth day, the factory had lost Rs.600 crores and Maruti shares had plummeted in value. It was obvious that the Maruti management and the government were helpless in the face of the workers' determined refusal to surrender.

The agreement between the workers and the management that ended the strike on June 16th does not reflect this situation. No one reading this extraordinary document would guess that the workers were in a strong bargaining position while the management and the government had their backs to the wall. Instead, those who brokered this “return to normalcy” created a scenario that disempowered the workers and made it seem as if it was their inability to hold out any longer that brought them to the negotiating table.

THE AGREEMENT

The signing of the agreement and the fact that the management agreed to take back the 11 office-bearers of the new union who had been dismissed on 6 June, has been hailed as a victory for the workers by some commentators.

But the terms of the agreement suggest otherwise.
A bitter “victory”

The 11 terminated workers will be taken back, but enquiry proceedings will be initiated against them and “appropriate disciplinary action” will be taken. Regular employees will be considered to have resumed work on June 17th, but actual shifts will resume from midnight on June 18th. An extra day of work on June 19th will be required to compensate for not working on June 17th.

In accordance with the provisions of the Payment of Wages Act, 1936 and the standing orders of the company, workers participating in the strike are liable to a fine of three days wages for every day of work lost. However, it was agreed that, for the moment, only ten days' wages will be deducted (ie one day's wage for each day of the strike). The remaining amount of the fine will be waived if, and only if, the workers maintain good behaviour and discipline, and abide by the rules of the company.

In accordance with the principle of “no work, no pay”, the workers will not be paid for the days they were on strike.

The workers agreed to maintain discipline, ensure expected levels of production and not indulge in any individual or collective activities that would hamper the normal functioning of the factory. The management also agreed not to behave badly or hold a grudge against the workers.
The agreement will be taken as a final resolution of all disputes between the workers and the management.

The story of the Maruti Suzuki strike of 2011 is very similar to that of the Honda strike of 2005. The Honda workers were persuaded by the so-called negotiators to come out of the factory. Once they did, they were mercilessly beaten by the police. By brokering this agreement, the self-appointed negotiators in the Maruti case have dealt an even more lethal blow to the workers' struggle. The Maruti Suzuki management is exhibiting care and concern for workers' welfare in the immediate aftermath of the strike. If the Honda case is anything to go by, this phase will be short-lived, and will be followed by a further tightening of the screws.

The 1,700 Honda regular employees who launched the strike in 2005 were workers on the factory floor. Of the 1,800 regular workers on the Honda rolls today, a large segment works as supervisors of contract workers hired through labour contractors. For instance, the motorcycle engine assembly plant at the Honda factory in Manesar is run by 4 engineers, 12 regular workers and 110 casual workers hired through a labour contracting company. Each shift in the assembly line in the no.2 motorcycle plant has 8 staff, 3 line leaders, 4 regular workers, 4 casual workers hired directly by the company and 101 contract workers hired through a labour contractor. Workers hired through labour contractors are responsible for the bulk of the production in the Honda plant. There are 6,500 such workers on the production line, and another 1500 in ancillary departments.
THE ISSUE IS GLOBAL

Regular workers and irregular workers. Casual workers employed directly by the company and contract workers employed through a labour contractor. Registered contractors and unregistered contractors. Workers who are entitled to PF and ESI, and workers who are not entitled to these benefits....

As many as 75% of the factory workers workers in Delhi, Noida, Gurgaon and Faridabad are invisible in government statistics. The vast majority – over 80% - of these workers are paid less than the statutory minimum wage. Shifts of 12 to 18 hours are the norm, and overtime is compensated at the same rate as regular duty and not at twice the regular rate as required by law.

The situation of workers in Maruti Suzuki and Honda is mirrored in thousands of small and medium factories operating within the 300 or so square kilometres of Delhi and the NCR, that are connected to other such operations in other cities thousands of kilometres away. All of them are struggling against similar strategies of exploitation and resisting attempts to undermine solidarity and unity.

Yet, it is this globalisation of oppression that is creating the conditions for solidarity across boundaries of race and nation, across different industries, different sectors, different companies.